I'm probably the only person you'll ever hear this from, but my favorite character is Gohyakumine Bankotsubo, who is for some reason labeled in-game as "Tengu", which bugs the hell out of me.
He's the very cliche "I want to destroy everything" villain, but I just love him. I love his crazy Tengu-do style, and the complete brutality he shows for his human opponents with his throws and holds, swinging them through the air and slamming them violently on the ground. His 41236F+P, 9PF+P, air throw, 2F+P, 3F+P, jumping punch hold, jumping kick hold, and low kick hold are all deliciously brutal, and his 8P+K on an opponent who's on the ground is definitely the coolest in the game.
I love his voice too, it just sounds awesome. I love hearing him laugh as he thrashes his opponent helplessly through the air by their head with his aforementioned 41236F+P and 9PF+P throws. His winning quotes are neat too. "Oh, the unlabored flawlessness of my being", "I have purified and cleansed the land", "A blood red flower blooms over your corpse". As are his intro quotes "I refute your existence", "You impudent fool", and my favorite intro quote in the game, "How unfortunate".
I like his whole tengu attire too, with the small cap, pom-pom sash, one-toothed getas, and his fan. I just find him to be an overall pretty cool character. I mean how many other games out there let you play as a tengu? Also, that beard.
Some of my other favorites would be Leon and Brad Wong. I like Leon because he's just a badass destroying people with his Sambo skills. He doesn't even do by-the-book Sambo, but instead does his own completely brutal "I don't give a shit" style. His outfits have always been among the coolest in the series too. I like Brad because Zui Quan is one of my favorite fighting styles, though I dislike the cliche of making Zui Quan practitioners actually be intoxicated when fighting.